Energy (Fuels, Levies, and References) Amendment Bill

I would like to talk about clause 4 in Part 1, which inserts after section 14(2): “(3) Levies recovered under section 24 may be applied for the purpose of meeting the reasonable costs and expenses incurred by the Crown … set out in subsection (2)(ba)”, etc. The thing that always concerns me about wording in these sorts of clauses—we are supporting this bill. Let us make no bones about that. We do support it. But sometimes you come across a clause, and the wording just does not sound right.

The reason I have a concern with this is the use of the word “may”. What this section says is that “Levies recovered under section 24 may be applied for the purpose …” of this. The reason I have such concerns about the word “may” is that it means that they may not be applied. So what could theoretically happen is that this levy raises more money than is needed to meet our international obligations, and the Government then decides: “You know what? Let’s just put this into the consolidated fund. Let’s just put this into a bank account to pay for the Skycity Casino, or whatever.” I would really like to see—and I am interested in why it says “may”. The Minister may be able to tell us.

What I would really like to see in legislation like this, especially in something that is imposing a cost on taxpayers—and we all acknowledge that it is a very small cost, but it is a cost. The Government, I think, is hoping to raise $10 million. The section should read: “Levies recovered under section 24 must be applied for the purpose of meeting the reasonable costs and expenses incurred by the Crown.”

What that does is it takes the ambiguity out of the legislation and it ensures that in fact every cent that is raised as part of this levy will go towards the purpose for which the bill is before the House. Without a “must”, with just the word “may”, it creates uncertainty and it means that the Government, or the Minister of Energy and Resources, or the Minister of Transport, or the Minister of Finance has wiggle room to apply that money elsewhere. That would be outside the legislative intent of the bill, and outside any sort of reasonable interpretation of the bill.

We just need to tighten up this legislation, when we are considering it at the select committee. What I would urge other select committees to do, when there is such a tight thing like this, is use a word like “must” so there is no ambiguity.

There are a couple of other things I would also like to talk about in clause 5. Section 24(2)(b), in clause 5, states: “when any excise duty or excise-equivalent duty would be paid if any were payable.” The interesting thing about this is I have had a look through the bill. It is an amendment bill. It is not very big at all. But it does not set out when it has to be paid. There is a general assumption we can make that when your tax is due, whether it is quarterly, monthly, annually, or whenever it is due, you pay it. But again, just to remove that ambiguity in fees for lawyers, and this sort of stuff, I say that it is good just to set down when the tax is due.

The reason I say that is that it says here: “Section 28 (which provides a penalty for late payment of a levy) does not apply in respect of the levy.” I am looking at this, going: “Why would you not have a penalty for the late payment of this levy, when most other legislation to do with tax or excise duties, or anything like this, actually has a late payment regime in place?”. Again, maybe the Minister in the chair, the Hon Nicky Wagner, might be able to enlighten us on this. But I would have thought it is just good practice to make sure that levies are paid on time. The reason that there are penalties for the late payment of levies is just to facilitate on-time payment. I just do not know why they have decided to remove the late penalty. It may be—and I am making an assumption here—that it is because the levy is so small that in the scheme of things any penalty would be negligible. In fact, it may cost more to enforce a penalty or to chase a penalty than it would be worth to actually pick up the levy that is due.

As mentioned, we do want to raise about $10 million. As Iain Lees-Galloway, I believe, alluded to, we do support this. The New Zealand Government has to be a good citizen when it comes to all of our international treaties, and this is part of the Agreement on an International Energy Program, so there is no contention. We are not saying this should not be paid. I am just bringing up a couple of questions that I have some concerns about, which I think should have been addressed at the select committee. It is possibly a little late to address them now, but it is stuff we need to look at when we are writing other legislation on this.

Also, if we go down to clause 8—[Bell rung] Mr Chair?

The CHAIRPERSON (Hon Chester Borrows): Stuart Nash.

There are just a couple more points I want to make on this. If we go down to clause 8—and again I am unsure why they have changed the wording. The wording used to be—this is where we talk, obviously, about the payment of the levy—“Payment into Departmental Bank Account”. It has changed to say “Payment of levy into account”. I do not know whether we are going to see a raft of legislation where all the wording is changed from departmental bank account to account, but the sort of conspiracy theorist in me goes back to the “may be used for levies” and “must be paid into a Government account” and, again, I wonder whether this is a way to sort of get around the fact that the Government needs $10 million to meet its obligations under the international energy agreement. It is going to collect, in a good year, maybe $15 million, so what it can say is: “Let’s just take that other $5 million and use it in the consolidated account.” But I am unsure why it has changed it from a “Departmental Bank Account” into an “account”.

There is something else in the legislation I would like to bring up and it is not a criticism of the Ministry of Business, Innovation and Employment, but it is really a point of process. What it says here, in section 33(3) in clause 9, is: “Before recommending that regulations be made under this section, the Minister must consult persons or organisations considered by the Minister to represent the persons affected by the levy concerned.”, and that is fantastic. I mean, consultation is part of making good legislation, and getting feedback from key stakeholders is a vital part of ensuring that legislation is robust and meets the needs of the taxpayer as well as the Government.

So I had a look at the ministry report and it talks about external consultation. I actually think that because it is in this legislation, there is compulsion to consult—we all agree with that. I look at the report and I would have liked the ministry to actually list whom it consulted with. All it has said is: “15 submissions were received and of these 10 contained direct comments on issues relating to the IEA obligation.” Then it says: “The vast majority of submitters …”. When you have got 15 submitters, is the vast majority 13? Is it 10? I do not know what “the vast majority” means.

Then it says: “Prior to the release of the discussion document, the Ministry discussed the levy proposal with a number of key stakeholders.” I would have thought that in this instance, in a Government ministry the size of the Ministry of Business, Innovation and Employment—and it is a large, large ministry—it would at least put down the people whom it had consulted with so that members of Parliament and members of the public could say: “Oh, OK, it did talk to the Automobile Association as a wide-ranging advocate for motorists.” I am assuming it talked to the Automobile Association, but one thing we do know with legislation, and one thing we do know with this Government, is that you can never assume anything. So one thing I would have liked to know is whom did it consult with, because it is a legislative requirement to consult.

Obviously, when we are developing legislation, we can argue that the select committee process is in fact legislative consultation, and we get that. But because this is actually a legislative requirement for the Minister to consult—because the bill does regard levies and it does regard money raised by an Order in Council at a time that the Minister may deem necessary. Consultation is important, but we just need to know—in fact, I think we have the right to know—who actually has been consulted with so that we know that it was not just Joe down the road and Bill round the corner and Joan up the hill.

There are a number of agencies. You know what I mean. That do a fantastic advocacy job on behalf of motorists and taxpayers, and with 15 submissions it would have taken, I suspect, a third of a page to list who the submitters were. It might have been Joe and Jane and Bill, but it also might have been the Automobile Association and the road transport authority and all these other ones. But the other thing is, more important, even if the ministry did not list the submitters, I actually think that it should have listed the key stakeholders that it consulted with, because then at least we would have known whom it considers the key stakeholders to be.

So just to sum up on this—I am talking about Part 1; I do know, thank you, Jami-Lee Ross, that we are now taking this debate as one question—we do support this bill. It is a pragmatic step, actually. I think the cost, if I am not wrong, is 0.05c for every full litre of petrol, or other type of fuel that goes into an engine, except biofuel. But we can talk about that later. Thank you very much.

I stand on behalf of New Zealand First and I just start by noting that I think New Zealand First is the only party that has opposed this bill from the start. I just take note of Part 1, new section 14(2)(ba), in clause 4, which states that the Crown must comply with our obligations under article 2 of the Agreement on an International Energy Programme to maintain the emergency reserves commitment. The party has always said from the start that that is an absolute necessity. However, there are a few factors that I would like to outline whilst referencing the parts within the legislation, but perhaps if you bear with me initially.

I agree that the timing of another tax on New Zealand citizens through a petrol levy is perhaps a good one. We were told by the Green Party that it supported all parts. I note with some humour that the National members did squirm in their seats when the Green Party acknowledged that it agreed with all parts of National legislation—I am being snide. The legislation is essentially a regressive tax. I just wanted to point out, for example, that 42 percent of Rotorua household incomes are below $50,000, and 58 percent of personal incomes in Rotorua are below $30,000. So although I want to determine the actual figure of the levy itself, which is discussed as being a very small number, I would suggest that the levy itself is a regressive tax and unfairly and unnecessarily puts undue pressure on low-income earners. I will talk to some of these parts here where we could suggest alternative methods, other than a levy, that would ensure that we comply with our international commitments.

What I would like to point out at this stage is that when we saw petrol go over $2—and I do not think anyone in this room would debate with me on the fact that it will do so again; the timing may be an issue, I think, and I hope that it stays low for a while—and what I was personally seeing in some of my studies was that petrol was becoming price-sensitive. There was an elastic response in terms of consumer demand to the change in petrol prices. That reinforces what I was saying about people being unnecessarily put under undue pressure with regard to the price of petrol. So New Zealand First just wants to stand in front of Parliament and say that the mechanism that we—I do not know—seem to have come to without much regard to consultation or consideration of alternatives seems an unnecessary burden on the New Zealand taxpayer.

I want to talk about that because New Zealand First campaigned, for example, on the tax-on-tax issue. So, for example, right there the GST component on the levies, which is nearly a third of the tax cost to consumers at the moment, has a GST component to it. So when I originally spoke on the bill in earlier readings, I suggested—and I do so again—that the Commerce Committee was perhaps in want of establishing alternative funding mechanisms in order to meet our international obligations.

Did this Government explore also the fact that, given some of the submissions, the ticket price was described as fluctuating, and when the discussion was taking place, the ticket price was becoming quite high? I asked the committee what the consideration was other than the submission from an oil supplier around the holding of physical stocks in New Zealand. The oil supplier said that it would be prohibitively expensive, and I imagine that the cost would be quite expensive. But what was the case? What was the research and what was the conversation that the committee entered into to understand what those prohibitive costs were? In those same submissions the conversation arose that we must meet our petrol stock commitments—this 90-day reserve—out of a need to maintain a level of safety, as it were, in case of some kind of worldwide emergency. So the stock levels were an absolute necessity. What we have said here is that we will buy tickets and that stock will be held overseas.

I would suggest to the Committee and to the members here today that that does not actually answer or solve the problem that we could potentially face if there was a worldwide crisis. I would even go so far as to suggest that we would kindly hear the words: “Oh, sorry, we don’t have the stocks to send you. I know you have your tickets but, unfortunately, there’s no oil to be sent down to New Zealand.” So I beg the question of the Committee: how in depth was that situation, that alternative, around physical stocks taken into account?

The other alternative that I would like to point out is actually putting the burden through legislation on the oil companies. I know invariably that oil companies will raise their prices, but as I alluded to before, there is some measure of an elastic response. I do not know whether you noticed in your summer holidays, whilst you were driving around the country, that this oligopoly market structure is starting to compete on price. It is something we have never seen before. What I would suggest to the Committee is that the producer surplus versus consumer surplus would be such that the burden of the extra cost would be taken up by the supplier more so than being passed on to the consumer. I wonder whether the select committee investigated that fact.

New section 33 in clause 9 outlines the setting of the levy. Thank you for your forbearance. I come to some very specific points. I note that in new section 33 there is actually no specified cap. I think it has been mentioned before that what we are discussing here is a levy that we do not know when we will stop charging. We know we have to hold a 90-day stock, but when do we stop charging the levy to maintain our 90-day stock? There is no actual description within the legislation to tell us that now is the time to stop using this levy.

In the same section the Minister must consult only with those whom he would deign to consult with. It seems to be a precedent with a bit of legislation that I have personally noted coming through the Committee stage through the House—that the Minister can consult with whom he decides to consult with. It was talked about by my colleagues on this side of the Chamber that it is important that we talk to all of those who are involved, not those whom the Minister decides are relevant. The reality is that the Minister’s opinion of relevance may not necessarily be that of this Parliament or the people of New Zealand. So it is concerning that that has been seen to be a precedent that has arisen in quite a few pieces of legislation that I have personally spoken to over the last few months.

Actually, in the legislation—please, if the Minister can correct me—there seems to be no specificity as to the purpose of the levy in the legislation. It seems like it is some kind of assumption that the levy will be used for the purpose of complying with our international obligations. Forgive me if I have missed something there, but there is definitely no specificity as to the value or the rate at which the levy will be collected. It has talked about the Minister’s proposed value or a formula used, but the ambiguity there is a dangerous one. It has been noticed previously that there also seems to be no cap.

Speaking as a member of the select committee that discussed this bill, it was, I suppose you could say, a relatively uncontroversial bill at the select committee. There were four submissions provided to the Commerce Committee. There were some changes made in the select committee to the bill, most notably that the committee recommended limiting the scope of the levy by clarifying that it was for the Crown to meet the reasonable costs and expenses of compliance with New Zealand’s obligation under article 2 of the International Energy Agency to maintain the emergency reserve commitments that are set out in that article. So that is quite an important amendment that was made.

There has been some quite good debate so far in the Committee stage on this bill. I do note that there has been a number of questions put forward for the Minister in the chair, Nicky Wagner, to answer or to clarify, and I have got a few more to put tonight. It would be useful if they were actually addressed by the Minister in the Committee stage, but in the absence of that happening, I will do my best tonight to actually address some of the things that have been raised by other members in the Committee stage. I note that the debate has been via the Opposition benches and that there has not been any participation from the Government’s side so far.

I have gone back and looked quite closely at the second reading speech by the Minister of Energy and Resources. I suppose there was a relatively important statement made by him when he said that “the Government continues to undertake a range of initiatives to improve the operating environment for the oil and gas sector,”, and he said that the priorities for the Government were to promote “energy efficiency measures to help make our fuel use more efficient,”. Well, this bill does not go to that. It deals with ensuring that we have certainty of imported sources of oil and security around that. Unfortunately, though, it does not actually address the wider issues of energy security generally in New Zealand or the wider issues of an alternative fuel production and where we are going as a nation on that. Those are two really glaring gaps. I would hope that the Minister, given that this is a new year and it is the beginning of a new term of Government, would be able to give us some indications of where he is intending to go in this area, and this would be a really good opportunity for that to happen.

I do want to take the Committee back, actually, a little bit further than what happened at the select committee, because the fact that this bill actually exists comes from a process where you have to dig a little bit into the process and actually dig into the documents to find out the information about this. There was a consultation that went on by the Ministry of Business, Innovation and Employment that released a discussion document back in October 2012. Yes, there were 15 submissions, as my colleague Stuart Nash has noted, but you do have to look a bit under the surface to actually find out this information. There were some very interesting submissions given during that process, and it is a real pity that those submitters did not take their submissions through to the select committee so that there perhaps could have been a bit more of an in-depth debate around some of those issues.

For the benefit of the New Zealand First speaker, there were questions raised in that process around whether host countries would actually release ticketed stock to New Zealand during an international supply disruption—so, whether or not the oil would actually come, even if there were tickets. The ministry noted at the time that the tickets were backed by Government to Government agreements, with a number of them being international treaties. So I suppose there is a reliance on that treaty relationship being fulfilled, and the Government would import stock to New Zealand only if oil companies in New Zealand were unable to secure their own stock. It was Z Energy that raised that issue during that discussion process. The ministry considered that the most likely scenario following an emergency declared by the International Energy Agency would be that the Government would release the stock to the foreign company holding it on the Government’s behalf, thereby fulfilling its obligations. There was a trust assumption. The select committee did ask and it was given assurances around that.

The select committee also asked whether or not there should be—well, this discussion paper certainly canvassed these issues—more domestic stockholding to cope with supply disruptions. This issue was also raised during the select committee discussion, and the ministry noted that “the New Zealand Institute of Economic Research study [said] that the discussion document [it] is based on found that building further domestic stockholding in New Zealand was not an economic way to mitigate the risk of supply disruptions.” It said that it was keeping a watching brief on this issue but that it was not economic, essentially, to do it. So those were the answers that were given to us as well during the select committee discussion around whether or not this would be a problem.

I just want to raise one more submitter to this discussion process, which, unfortunately, did not submit to the select committee. The Sustainable Energy Forum “recommended that New Zealand should take steps to reduce its reliance on oil imports. It suggested that longer-term issues such as climate change and ‘peak oil’ should be considered in the analysis of oil security.” Unfortunately, when we received the report to the select committee on this, this issue was not part of that discussion. I note, as I said at the beginning, that the Government did not consider it relevant to raise those issues or give any signals around those things when it brought this bill back to the House. I would make the point that there is a far more serious issue highlighted that sits behind this bill, which is future energy security for New Zealand. I am very pleased the Sustainable Energy Forum raised this issue back in 2012 during the discussion process, but, unfortunately, it was not considered to be a part of the discussion in the select committee.

As I said, Labour supports this bill. I note the issues that have been raised by other colleagues across the Chamber during the Committee discussion on this bill. I think it would be good practice for the Government to be taking notice and for there to be a response on some of the issues that have been raised tonight. It might be an uncontroversial bill, but it does raise some significant issues that do need to be addressed around our treaty obligations and how they are being met, around the costs, and around the wider strategy for New Zealand around future energy security and growing our alternative sources of fuels. The concerns about our international reputation are valid. This Government is, however, prepared to act only on protecting our reputation.

It is a pity, as I said before, that there were not more submissions on this bill, but there has been a good discussion tonight. I think that there will be further discussion in the Committee stage.

It is a pleasure to rise and speak on this bill, particularly because it is a bill that has very broad support across the House, although we might disagree on some perspectives. It has been well canvassed, of course, that this is all about New Zealand meeting its oil stockholding treaty obligations.

I think a very positive sign on it—and I will come to what Mr Tabuteau had to say about how it might be paid for—and the fundamental change here that is very important is that not only does it bring about a more sustainable way of funding our obligation, it is actually a far fairer way, because it is actually setting the costs of that obligation against the users of the product, the fuels. If you take the current way we have done it for some time under general taxation—and I take the point that Mr Hughes raised earlier, that you have got people riding on electric trains or electric buses or who are using shared transport like a bus, so their actual consumption of these fuels is much lower. But because it is through general taxation, they are actually being taxed disproportionately to pay for it, so making it a user-pays thing on fuel is a very sensible way of doing it.

It is a 90-day stockpile—the stockpile in this case is not a physical stockpile, but a virtual stockpile—that is, based on your actual consumption needs. By tying it to the litres that are consumed, we are actually matching our expenditure on the 90-day stockpiling with our actual consumption. That changes over time. You need only look at the gas-guzzlers of the 1970s and compare them with the nippy little fuel-efficient cars of today to know these things change over time. I tell you what, I am unfortunate enough that I can remember the gas-guzzlers of the 1970s like the Mark III Zephyrs, the Mark III Cortinas, and also the little Escorts, which did not take too much fuel but were nowhere near as efficient as the modern cars of today. So I think it is a very, very good thing that we are moving to a per-litre based charge.

I would now like to cover this part that Mr Tabuteau raised about who should pay for that. Obviously, if you look at pretty much anything else that is consumed, the consumer pays for what they consume. But New Zealand First seems to be saying that it thinks it is the producer that should pay for the thing that you are going to consume, so it is a very interesting 1970s way of approaching the problem.

In itself it would have some inherent unfairness, because not all oil companies in New Zealand and not all retailers are the same. They do not all produce or import the same amount of fuels into New Zealand, and they certainly do not all sell the same, so the only way the New Zealand First model could actually work is if it regulated precisely how many litres of what type of fuel each of the oil companies and/or retailers could actually sell. This is really going back to the days of the very visible hand of Government, where you think you can control the entire economy. You certainly cannot.

💬 Stuart Nash: But they’ve got all that data already.

Putting a small levy against those who consume the fuels is definitely the right way to go. But thank you, Mr Nash, because I would like to speak to the point that you raised. In Part 1, Section 14 amended (Purpose of levies), new section 14(3), inserted by clause 4(2), to change that word “may” to “must” would serve no practical purpose other than to constrain Governments, current and into the future. If it is a must, then any levy collected over any time can be applied only without further legislative amendment to that specific purpose. You need only look at the point of where we are today and you need only look at what has happened in the market for oil and petrol at the pump over the last recent months to know that it can be quite a volatile thing.

We could have a situation, Mr Nash, where we could accumulate quite a bit of levy—levy that we are not actually having to consume in total—and it sits there in an account doing nothing. Well, it is not really the best use of an accumulation of Government funds. But what the word “may” means is that it can be applied to that very purpose, which is exactly what we want. Changing it to “must” would achieve nothing except to place an unnecessary constraint upon the Government.

The other point I would like to just touch upon briefly—because again it was raised by Mr Tabuteau—is the regulations that can be made by Order in Council. Quite frankly, we have a system here, and these fuels are going to remain a part of our landscape—our “drivescape”—for many, many years to come. It makes complete sense that we do not want to be tinkering with legislation every 12 months or so. By permitting certain regulations to be made by Order in Council it allows the Government, the Government of the day—I hope it remains us; we are certainly working very hard and will continue working very hard to continue with that—to make changes to the levy, the rate of the levy, or the formula for the levy in a way that best suits the nature of the consumption of the day, the usage of the day, and the requirements of the day. It makes absolute sense, as, in fact, do, I think, the provisions across Part 1. Having said the part that I wanted to say, I will stop there and allow other members to speak on the other part.

I seek leave for the Gambling Amendment Bill (No 2) to be taken as one question.

The CHAIRPERSON (Lindsay Tisch): Leave was actually approved when we last debated the bill, and so there is actually no need to do it again. The point has been made. I am keen to hear Dr Megan Woods.

Thank you, Mr Chair—I am very keen to speak. I want to speak to Supplementary Order Paper 45 in my name. It amends clause 10 and to be specific, it amends section 35(1)(fa), in clause 10(2), by inserting after “petroleum of engine fuels”, the words “other than biofuel or biofuel blend, as defined in the Customs and Excise Act 1996,”. The purpose of this is to send a very clear signal about the importance of biofuels and the importance of transitioning away from a complete reliance on fossil fuels to different types of energy. It is a different way of thinking about New Zealand’s energy security, as my colleague Clare Curran talked about in her contribution on this bill.

One of the things that we do have to be prepared for is the fact that if we are going to encourage a biofuel industry in New Zealand, we have to have the Government behind it. My colleague Stuart Nash talked about the very low contribution in reality that this excise puts on fuels. What exempting biofuels and biofuel blends from this levy does is it shores up the very tight economics that exist around the viability of the biofuel market at this stage. What we know from history and from the companies that are commercially involved in biofuels is that every few cents or part of a cent matters in terms of whether or not we can have biofuel as a real alternative to fossil fuels.

When Labour was last in Government it took its responsibilities around encouraging a biofuels industry very seriously. Unfortunately, a lot of the measures we put in place were repealed by the current Government, but we would like to use this opportunity to send a clear message that once again we do want to look to our future. We want to look to a future that is grounded in the 21st century, a future that acknowledges that our planet is changing and that we need to do things very differently.

What Labour did in 2008 was to place an obligation on fuel retailers that ensured that a small percentage of the fuel that they sold was indeed biofuel. This provided certainty for biofuel companies that were considering whether or not to invest in New Zealand and whether or not there would be a market for their product. So this Supplementary Order Paper is in much the same vein. It is about providing that incentive and it is about providing the certainty for that to be done.

The New Zealand Bioenergy Strategy prepared by the Bioenergy Association indicated that 30 percent of our transport fuels could be from biomass by 2040. This is quite a long range. We are looking out to our future, but we really could be moving towards 30 percent at this date. But it does need encouragement, and we do need to signal very strongly that this is the kind of future that we are looking for. Some research has indicated that we could actually be a whole lot more aspirational around this.

Scion, our wood Crown research institute, which has done a lot of work in the use of biomass from wood and forestry products, has shown that long-term we theoretically could do 100 percent of our fuels from our biomass. Of course, as Gareth Hughes pointed out in his contribution, we do have to ensure that we are not infringing on our food supply in our rush to produce fuels, but what we do have to realise is that there really is an opportunity here for New Zealand. There is not only an opportunity to do better for our planet but there is also a commercial opportunity for New Zealand companies to do very well in this. What we do know is that in New Zealand we are very well placed to do this because of the amount of biomass that we produce, because we are primarily a primary-producing country, and we do have quite a large waste stream from our biomass that can be utilised as well.

What is more, New Zealand has a flourishing biological sector and a biotech sector that has become very skilled, which really could make this industry succeed in New Zealand, because the reality at this stage is that the economics of producing biofuels or biofuel blends—whichever you like—is likely to be carried through by the co-products that are extracted through the production of these biofuels. We have a very strong history and a very strong record of a number of very innovative companies in New Zealand that have made very good use of very strong science in this area, made very good use of very strong knowledge, and indeed have become some of our biotech success stories, which we are all very proud of. But it is not only small start-ups that are seeing the opportunities here. In fact, just last year, Z Energy, one of the largest energy players in our market place announced plans to spend $21 million on a biodiesel plant at Wiri in order to process tallow from the meat industry. Again, what we have is the utilisation of a waste stream from another of our primary industries.

I think that what we see is a real opportunity here for New Zealand. We see an opportunity for New Zealand to move away from a sole reliance on fossil fuels, and I think there is, maybe even across on the Government benches, a growing realisation that that is what the 21st century is going to need to be about and that we are going to have to look at different ways of doing things. It may be rather symbolic, but we have the opportunity in this piece of legislation to exempt biofuels and biofuel blends from this extra levy, to make the economics of it stack up just that little bit more—to make it something that really is a goer, something that we can give a real opportunity to, and we can invest not only in our innovative companies but also in our future, and transition ourselves into what we know is coming.

I would like to hear the Minister in the chair, Nicky Wagner, respond to my suggestion in Supplementary Order Paper 45 that we do exclude biofuels and biofuel blends from this. I would like to hear the Minister talk about what she thinks and, if this is not the correct way to do it, what the correct kinds of signals to give to this industry are, and what plans the Government has to ensure that we are preparing for a future in the 21st century. If the Government were not to support this, I would like to hear from the Minister in the chair as to why it will not support this, why it will not make this very symbolic gesture, which, as we have already heard from colleagues who have spoken, is, in reality, very low level.

At the moment we have very low levels of biofuels, so we are not talking about great revenue streams here. But what we are doing is talking about backing our future—backing our companies that excel in this area and backing our planet for the 21st century. We know that this is what the future has to bring. I would like to see the Government come on board and support a measure that is about planning for that future. Thank you very much.

Kia ora, Mr Chair, ngā mihi nui ki a koutou, kia ora. I want to pick up on the member Dr Megan Woods’ point on biofuels and support her Supplementary Order Paper 45 on the Energy (Fuels, Levies, and References) Amendment Bill, and urge the National members to support this. I was privy to the discussions on it on the Commerce Committee and I am trying to recall the reasons for opposing it, so I am going to pick up on a couple and urge the National members to support it, because biofuels, as Dr Woods said, are a fantastic opportunity for us. It was one of the parts of the Pure Advantage report that picked out a $6 trillion market that we could be accessing, something that PricewaterhouseCoopers says is potentially a $22 billion annual economic opportunity for us. In a carbon-constrained world, where even the International Energy Agency is advising Governments like ours we cannot afford to burn two-thirds of the proven fossil fuel reserves we have already discovered let alone try to find some more deep off our coasts, the world is crying out for sustainable solutions like biofuels. When I was in Beijing many years ago there were 550 cars per day entering Beijing’s congested roads. We are seeing a Chinese automotive market that could be the largest in the entire world in a matter of years. Finding sustainable solutions to power people to get around their cities, towns, or countries is critically important, and I like the idea that our country could be playing a role.

I urge members to support this Supplementary Order Paper because what we are sending is a very important price signal to those people like Z Energy contemplating or committing to tens of millions of dollars of capital investment in biofuel infrastructure, and others around the country that are being picked up on. Those entrepreneurs, those researchers, and those people who are maybe thinking about getting a Callaghan research and development grant will be negatively affected by the uncertainty that this signal sends.

As I said before, the latest data is showing that the production of biodiesel has declined massively from 1.2 million litres in 2007 to only 0.24 million litres—so less than 1 million litres—in 2013. Over the same period we have seen the production of bio-ethanol increase marginally, but down from its heyday. We have seen the production of biofuels obviously increase and total consumption decrease over that period. We have seen successive policy changes over the time add uncertainty. Adding a price signal by exempting other forms of fuels but not biofuels is a counter-productive step. Members over on this side acknowledge that there is a price signal. I pointed out how minuscule it was, but I would also want to challenge some of the logic. If we are trying to make oil cheaper artificially—be it subsidies or some sort of command and control regulation—what we are doing is sending a very strong signal to people to consume more of it, which, of course, is going to cost more in the future. This is why the International Energy Agency is calling on parliaments like ours to cut some of the $610 billion annually spent on fossil fuel subsidies, because what we are seeing is a perverse negative feedback loop where more fossil fuels are burnt, more carbon emitted, and there are more negative impacts.

So I would urge members to support this Supplementary Order Paper. What we want to do is support a flourishing biofuel industry where we can export some of the intellectual properties, some of the products, potentially. With the world counting down the months to the all-important Paris climate talks, biofuels can play a critical role, as long as those criteria I elucidated earlier are met. These are net negative emissions, that they do not compete with agricultural land and food production, and that they are actually sustainable. There is great work being done by Kiwis across the country to invest in biofuels. We want to support them, and that is why I would urge National members to support it.

I want to challenge the logic of the opposition by the National members, because one of the arguments at the select committee, I understand from officials, was that biofuels are still a liquid fuel, requiring oil stocks to be stored overseas so it is fair and commensurate that biofuels should pay this levy to supply the tickets. That does not make sense. We know that biofuels reduce our dependence on imported oil. We know that biofuels increase our resiliency. We know that biofuels support flourishing regional economies and local jobs being created. I also challenge you because there is quite a contradiction. When you look at electric vehicles, the National Government—to its credit; and I give it credit—has removed the road-user charges from electric vehicles. Electric vehicles are another significant opportunity for New Zealand to save money, to save carbon, and to grow jobs. When it comes to eliminating the road-user charges—

I did not quite understand the speech of the last member, Gareth Hughes. He was supporting our Supplementary Order Paper 45 and then challenged our logic. I do not know quite where that fitted in, but maybe I missed something along the line.

The other thing I would like to talk about is Mr Brett Hudson. His speech actually epitomised everything that is wrong with this Government. Let me give an example. I talked about the fact that this legislation says that this levy “may” be allocated to meeting our international obligations, whereas it should say “must”, because the purpose of this bill is—and I will read it—the objective of the “Energy blah-blah-blah Bill” is to allow for the costs of New Zealand’s oil stockholding treaty obligation under the agreement on the international energy programme to be met through a levy on fuel. This is the very reason why this piece of legislation has been brought before the Committee. Mr Hudson stands up and has the nerve to say “Well, you know, if we raise more money, then we may apply it elsewhere.”—like to Skycity’s $130 million and that sort of carry-on. That is exactly what is wrong with the Government, Mr Hudson. What the people of New Zealand want to know with a level of certainty is that if they end up paying for this—and I suspect that, actually, it will be the producer who will end up paying for this—that it goes directly into an account that meets our international obligations as per the intent of the legislation. That is what they need to know. I am astounded.

The other thing, and I agree with the New Zealand First speaker to an extent—and we support the bill—is that what we do not want to see is this legislation enacted and then a day afterwards the price of fuel goes up by 3c a litre and the oil companies saying that they have just got another levy to pay and therefore that gives them an excuse to raise the price. As we have alluded to, the cost of this on every consumer is about 3c over a 60-litre tank of gas—in fact, I suspect that they will not put up the price because there will be a little bit of controversy. In fact, we will go hard and work together on this. We will go really hard. If they whack up the price of petrol because of this levy, then we will hold them to account for that.

But I do understand what you are talking about. The reason I say that is that the amount of tax on petrol in New Zealand is substantial. You have got your excise tax, you have got your GST, and you have got this. You know, one of the fundamental principles of tax is that there should not be a tax upon a tax. It occurs a lot in New Zealand because we do have excise taxes and we do have GST, so the GST is always a tax on a tax when there is an excise tax in place.

But one of the things I want to have a look at is that the New Zealand First member Fletcher Tabuteau said—and the reason why, fundamentally, I do not support what he said—that it should be paid by the supplier, i.e., the guy who owns the pump. Well, I have been told by the petrol guys that they make about 4c a litre. Let us have a look at what the importers have been making on this. From 2005 to 2010 importer margins were around 13c a litre. From 2010 to 2015 importer margins were 26c a litre. In late December importer margins were as high as 40c a litre. They were as low as 9c a litre in that 2005 to 2010 period. I do not know whether 9c a litre is sustainable or 40c a litre is sustainable. What I have tried to do as our energy spokesperson is have a look at all the costs along that supply chain. I cannot for the life of me determine who is being ripped off. I suspect the New Zealand motorist is—there is no doubt about that, because at a 40c a litre margin someone is making an inordinate amount of money there. There is no doubt about that.

But I have worked in this game. I imported and traded petrochemical derivatives for 8 years. I know how this works. It really annoys me when petrol companies, as soon as the dollar moves or as soon as the price of crude moves, go “Whoops, our costs have gone up.” and they whack the price up, and yet when it comes down they are incredibly slow. And let us not be generous with these guys. I tell you what: the price has dropped, but the last time the price of crude was US$50 a barrel, our exchange rate was about 0.63 and the price of petrol at the pump was about $1.40. So somewhere along that supply chain someone is making extraordinary profits. I think that as a Parliament we need to take a good hard look at it.

💬 Clare Curran: At the airlines.

Clare Curran is dead right—the airlines. If Air New Zealand comes out with record profits this time, any MP who comes from the provinces and gets absolutely reamed by Air New Zealand will, I think, challenge them on this. The profits those guys are making are obscene. Thank you very much.

I want to just carry on where Stuart Nash left off because I think he is absolutely right. There is an enormous amount of sensitivity around putting up petrol prices. Yes, it is only 0.045c a litre—it is only 3c a tank of gas, or if you have one of the gas-guzzlers like the National Party members drive, probably closer to 10c—and it is, nevertheless, a small amount, but it is very sensitive right at the moment. We have seen in recent weeks the price of petrol falling, but falling slowly. When the New Zealand dollar fell, immediately—the day after the New Zealand dollar corrected—the price of petrol went up again. I think there is something that we need to be looking very, very closely at here. We need to look at exactly who is extracting that margin—the petrol companies, the retailers, the wholesalers, whoever it is—and make sure that the consumer is getting a decent deal, because I do not believe that right at the moment they are.

The AA—the Automobile Association not Alcoholics Anonymous—has been following this very closely and has been doing a great deal of work in this area, and due credit to it for doing that. Even the Automobile Association was saying, particularly with the price of diesel, that it could not understand why the price of diesel had not come down further and why the price of diesel had gone up as quickly as it had once the New Zealand dollar had started to fall, and, therefore, the cost of our imports started to rise. So this is a very sensitive issue.

I want to agree again with Stuart Nash when he said that we need to watch this very closely. What we do not want to see is that the next minute we turn around and say that, actually, petrol prices have gone up and it was partly due to the Government, to Parliament, agreeing to put an extra condition or an extra tax or an extra levy on our petrol. That is certainly not the case when we are looking at 0.045 cents a litre—less than half a cent a litre.

The Labour Party has supported this bill because it is part of our treaty obligation. We acknowledge that. We acknowledge, as part of our agreement with the International Energy Agency, and article 2 in particular, that we need to have in place a 3-month buffer, effectively, that will enable us to have the safety of supply that we need. But it also goes a little bit further than that. It also enables New Zealand, along with other countries, to be able to, effectively, look after ourselves so that oil-producing countries do not spike supply as they have done in the past, certainly in the 1970s. So this gives us a little bit of a breathing space while action can be taken, should that happen with one particular big supplier, for example.

So it is part of our international obligation. As an international citizen we adhere to that, we play a big part in that, and we will go ahead with it, and that is the reason. Certainly, as foreign affairs spokesperson, I am in agreement with why we should sign up to this and agree with the Government on this. This is not a club. This is not one of those clubs you join when you want to embark on an international expedition into a war zone. It is not a club; it is a treaty, and we have obligations under that treaty. Just on that, I think that in the debate on the Prime Minister’s statement the Minister of Defence today was wholly—wholly—unconvincing about the rationale for wanting to go into Iraq, not understanding whether they could make a difference—

The CHAIRPERSON (Lindsay Tisch): Order!

—or have any idea of how they were going to get out.

But coming back to the bill, as I say, the costs of maintaining this degree of backup in this treaty have gone up. This bill provides a smoother way of being able to recognise the way that those costs have gone up by allowing an Order in Council and the Minister to be able to set the levy rather than it having to come before Parliament. It is a much more efficient way of doing it. However, of course we will be keeping a close eye on what the Minister does because we do not want to give the Minister carte blanche to just raise prices whenever he fancies doing that.

I thought the regulatory impact statement was a good one. It was thorough and it went and looked at many of the other options besides this particular option to increase the levies. I just want to run through those really to reassure the public that this has been looked at. We understand we have these obligations and we understand we want to be part of this treaty; therefore, we must meet those obligations. The various options that were looked at were whether we should embark on this treaty through ticket contracts, effectively through a process of ensuring that we have the requisite amount of fuel, essentially, stockpiled, or whether we should do that domestically. That was looked at and it was decided that the domestic stockholding was not a feasible option. It was not as efficient as using the ticket contracts. It certainly had much greater overhead costs in terms of what it would have imposed on New Zealanders and so, as a result of that, the Ministry of Business, Innovation and Employment went with the ticket contracts.

The ministry then looked at the obligations and who should be responsible for fulfilling those International Energy Agency agreement obligations—whether it should be the oil industry or whether it should be the Government. It was decided that, given that the Government was able to enter easily into international treaties and for various other reasons, it was a much better way of going about this rather than imposing those costs on the oil industry, which obviously in turn would pass them on to consumers. The ministry then looked at how the costs of these obligations, our agreement obligations, should be funded and whether we just pass it through Crown funding or a fuel monitoring levy. The best system was that it would go through a funding ticketed regime generated by a monitoring levy.

So I think there has been a good deal of work done on this, as Clare Curran said, in the Commerce Committee. There were some good, although very few, submissions made to the select committee. The bill was looked at in some depth. There were good questions asked and in front of us here we have the end result of that in the Committee stage. I think we have reached a pretty good point with where we are and that is the reason the Labour Party has supported it.

But I just want to add, before I finish, my support for Dr Megan Woods’ Supplementary Order Paper 45 to exempt biofuels, because I think she is absolutely right. Biofuels are the answer. They might not be seen by this Government as being the answer but this Government is, unfortunately, intractably tied to tired old thinking when it comes to the oil industry and alternative fuels. Unfortunately, the support for biofuels was cut immediately when this Government came into office in 2009 and that effectively killed our biofuel industry. As Dr Woods said, Scion, our forestry research institute, has done some extraordinarily good work in turning forestry waste and forest land into an ability to produce a biomass that would be able to support a biofuels industry. I think that that should get as much encouragement as it possibly can and that by giving an exemption to the biofuels industry in this bill, as we have done for jet fuels—85 percent of all fuels, I think, are covered by this levy, but jet fuels are not—we could do exactly the same with biofuels with very little problem and that would enable us to send a very strong signal to the biofuels industry that this is an industry of the future, it is something that New Zealand has comparative advantage in, and we should be able to support it.

I move, That the question be now put.

We move to the vote. [Interruption] Order, please, when we are doing votes—[Interruption] Order! There is no talking when I am speaking.

The question was put that the amendment set out on Supplementary Order Paper 45 in the name of Dr Megan Woods to clause 10 be agreed to.